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Business Strategy

5. Product Market Matrix?

Corporate Strategy is to define which market you would choose to sell which product or service. Igor Ansoff came up with a concept to help executives to design Corporate Strategies using the framework called Product Market Matrix, also known as Ansoff Matrix.

Ansoff categorised the corporate strategies to perform business by the matrix of market and product. By this matrix, there are four strategies which are Existing Market, New Market, Existing Product and New Product.

Product Market Matrix

1. Market Penetration Strategy

This strategy is to grow the business based on selling existing products to existing market. Increase market share by using marketing measures which are to find a new customer in the existing market. Using promotions and distribution strategies will allow growing your business in the current market. In other words, you need to have enough potential to sell your product to the market. If the market is mature and the products are a commodity, then there can be cases that this strategy will not work. Therefore, evaluate market potential, size and the capability of the product is required for this strategy to work in your business.

2. Market Development Strategy

This strategy is to grow the business based on selling existing products to new market. Therefore, the new market can be new customer segment or new region and countries. Existing products can be customised to meet the demand from the new market segment. Rebranding mid-level brand to different brand to target different customer segment or changing existing cosmetics for grooming products to reach men can also be part of Market Development Strategy. Every company will utilise their available resources and capability to expand sales. This can be the easiest way for companies to explore new market segment as the core capability can be utilised.

3. Product Development Strategy

This strategy is to grow the business based on selling new products to existing customer. If the company has the flexibility and the resource to develop new products for existing customer, this can also be a valuable strategy to take into consideration. Products development can be products in same categories such as television and DVD player, or it can be a different type of product such as selling financial loans or insurance for car manufacturers. There are also cases that you add product lineups by different colours or size from your existing product. This allows you to bring value to your existing customer and the variety of product can at the end attract a new customer as well.

4. Diversification

This strategy is to grow the business by selling new products to the new market segment. The diversification that Ansof relates to in this framework is an unrelated diversification. Unrelated diversification is where you will penetrate the market with a product which is not relevant to your existing product. There are cases that you choose unrelated diversification to mitigate the risk of depending on particular product and customer segment. For example when you have a product only for high-income class, then under recession your product can be in a critical condition. Therefore you may also want to add a new product which you can reach out to mid-income class to mitigate the risk during the recession.

Summary of This Topic

Product Market Matrix is a very clear strategy that you can categorise and consider for your business strategy design. However under the compound business environment just choosing strategies based on these four categories can have high risk. Therefore it is necessary to develop strategies combining with another framework as well. Eventually, Product Market Matrix can be the first generalised categorization to evaluate what product and market segment you target and understand general risks and key points to take each of the strategies.

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